It is easy to be pessimistic about climate change policy in Canada. One saving grace of the federal impotency is that it has spurred the provinces to action.

Following the US example, where many states have reacted to federal action by enacting their own emissions reductions plans (there’s even a map!), the provinces are claiming the mantle of leadership in Canada. It has the feeling of a “grassroots”, or at least a moderate-sized shrub, movement.

Quebec was the first province to set an emissions target — a 1.5% reduction in GHG emissions below 1990 levels by 2012 — which the government plans to achieve through an expansion of wind energy, hydropower, public transit and energy efficiency. Since then, almost every province, save Alberta and Saskatchewan, has advanced some form of a plan to reduce GHG emissions.

The recent decisions by British Columbia, the source of 9% of Canada’s GHG emissions (2005 data), have drawn the most attention. In this year’s Speech from the Throne, the province announced the most aggressive short- and long-term emissions targets (10% below 1990 levels by 2020, a 33% drop) of any jurisdiction in North America. The province plans to meet the target by expanding hydropower, closing coal-fired generators, investing in public transit, improving household energy efficiency and modernizing the electricity grid. And it made a big splash by joining the Western Regional Climate Initiative, a plan by several western US states to use (currently undefined) market-based mechanisms to reduce greenhouse gas emissions

There’s no shortage of skepticism about BC’s plan. Of course, there would - or should? - be even more skepticism if BC did not have a plan at all.

The most significant announcement occurred at last week's meeting of the Premiers. Ontario has expressed interest in establishing BC-style emissions reduction targets and joining a carbon cap-and-trade plan put forth by several US states. This is significant not only because Ontario represents 26% of Canada’s GHG emissions, second only to Alberta (33%), but because it may set the stage for a trading program that unites a number of provinces.

The Regional Greenhouse Gas Initiative (RGGI, or “Reggie” to NY Yankees fans from the 70s) is carbon cap and trade program between nine, now ten thanks to Maryland, northeastern US states. The program aims to reduce carbon dioxide emissions from power plants by 10% from current levels by the year 2019.

Climate change junkies are quick to criticize the limited scope of RGGI: only carbon dioxide, only power generation, only a 10% reduction. You can think of RGGI as a demonstration project or a pilot program. The states involved hope it will show how a broader cap-and-trade program might work.

In theory, a cap-and-trade system is simple. At the beginning, a total emissions cap is set for the region, in this case for power generation. The electricity generators will be allocated carbon allowances or permits under the cap. If a generator exceeds the cap, it must reduce emissions, purchase permits from another generator, or pay a fine. The RGGI system is also investigating the licensing of offsets, like investing in regional clean energy generation or forestry projects.

In practice, however, a cap-and-trade system is far from simple. How should caps be set? Should permits be allocated based on existing emissions, regardless of existing plant efficiency? Should power imported from outside the region be counted? How? What is an acceptable offset? RGGI will give the states the opportunity to test methods of allocating emissions permits or allowances, monitoring emissions and establishing a carbon market. This experience will be crucial in its true end goal: a national cap-and-trade program involving different sectors of the economy.

Now, despite what it may say in the Ontario’s press release, a Canadian province cannot easily join RGGI, for the same reason that Quebec, or Alberta, or PEI for that matter, cannot send its own team to the Olympics. Only the federal government has the right to negotiate, sign and ratify binding international agreements or officially represent the country at international negotiations. However, the provinces have jurisdiction over natural resources and power generation. A province like Ontario, or a group of provinces like Quebec and the Maritimes, could easily set up its own cap-and-trade program in the vein of RGGI, with the dual goals of reducing emissions and placing pressure on the federal government.

That is why Ontario wants to watch and collaborate. And that is why Quebec and the Maritime provinces are already listed as official observers to RGGI.

In the end, reducing Canada’s greenhouse gas emissions to a level consistent with global climate regulation (60% below 1990 levels by 2050) will require a coherent federal policy. The provinces can pave the way. The cities too, but that’s a topic for another day.